Friday, May 10, 2013

My View

Random ruminations from your resident curmudgeon...

We know that we live in a global economy, one in which capital (money) can move freely across borders and businesses are quick to move to parts of the world that offer opportunities for growth and profits. There are a number of factors that affect the ability of a company to be profitable, such as availability of labor, tax rates, and the rule of law. About that last item... Whether individuals or companies, we all want to know what the rules are and we want them applied fairly. And we want the legal system to be accessible and cost effective. A legal system that is too expensive for most to access or is so complex fails to serve the public. And, surprise, that is what is happening in the United States. The U.S. now has the most expensive legal system in the world, which makes it more difficult and costly to conduct business and is often an impediment to access for individuals. According to the Fraser Institute in Canada, which assesses legal systems across the globe, the United States was only one of 20 major countries where it had gotten more difficult to do business since 2000. To confirm that finding, research from the World Economic Forum in Davos, Switzerland uses 22 metrics to measure institutional (national) quality, including ethics, protection of property rights, and access to the legal system. The United States is not in the top 20 countries for 21 of their 22 measurements. This is appalling but expected when the legal system is designed to benefit the lawyers more than the people it represents. Unfortunately, it is only going to get worse as Congress adds new laws to the books that serve as fodder for the legal profession.

I would give my right arm to be ambidextrous.

The Social Security Trust Fund (SSTF) report was released this week to Congress, and while it may get some attention for a few days, it will quickly fade from the public eye. It shouldn't. Some of the numbers are truly staggering. For instance, the net present value of the unfunded liability of social security will go up to approximately $23 TRILLION dollars. This simply means that if the fund were to be actually solvent and have the funds necessary to pay all its future obligations, there would need to be $23 trillion in the bank. There is nothing in the bank, so to speak, except the ability of the government to continue to issue more debt to have the funds to pay beneficiaries. Also in the report is the fact that over the previous 10 years, the SSTF has cost taxpayers an additional $500 billion as lower interest rates have cause the fund not to earn interest income at projected levels. This has forced the government to issue additional bonds to make up the shortfall. The date where funds received will be less than funds paid out has been moved back once again, this time to 2017. This is much, much earlier than projected. This situation means that benefits will be cut; taxes will be raised; or some combination of the two. While this will not have a long shelf life with today's media, all of us would be wise to stay focused as this is going to have an impact financially on every wage earner and retiree. And it is not going to be good.

You are only young once, but you can be immature forever.

Having recently filed tax returns, the IRS is still fresh on most people's minds. If we are unfortunate to have to interact with the IRS beyond filing our returns, most would say it is an uncomfortable experience. Well, how about the IRS now getting involved in your health care? Under Obamacare, the socialized medical program, the IRS is poised to play a dominant role in our healthcare system. The agency is charged with administering 47 different provisions of Obamacare, including levying penalties against businesses and individuals that do not comply with the insurance mandate. The IRS will also be involved with the distribution of subsidies to people making less than $45K per year; they will collect the Medicaid surtax on those making more than $200K per year; they will be involved in the state run health exchanges, and the list goes on. We have seen that the agency can be heavy handed and certainly inefficient. Now imagine them involved in numerous phases of our healthcare system. My take... exercise, eat right, take your vitamins, and don't get sick.